Are you in line for a windfall from Vodafone?

30th August 2013

Vodafone investors could be in line for multi-million pound windfall as the communications giant closes in on the sale of its Verizon stake writes Philip Scott.

Following an abundance of media speculation, and an 8 per cent share price jump over the past week, Vodafone has gone on the record and stated that it is in discussions with Verizon Communications Inc. regarding the possible disposal of its US arm whose principal asset is its 45 per cent interest in Verizon Wireless.

If such a sale sees the light of day, an investor holding £5,000 of Vodafone shares might receive £2,000.

Current speculation suggests that Vodafone could sell its 45 per cent stake for around $130bn and if so, it is expected that a proportion of the cash could be returned to shareholders via a dividend payout.

A deal at $130bn is worth around £84bn to Vodafone shareholders or 174p per share. Vodafone may pay out around £40bn, around 83p per share, as a special dividend.

But discussions between Vodafone and Verizon Communications have run hot and cold for some time and Vodafone management says “there is no certainty that an agreement will be reached”.

Adrian Lowcock, senior investment manager at fund broker Hargreaves Lansdown says: “The size of the transaction is huge and shareholders could be in line for a big pay-out. Vodafone has been a popular stock for fund managers. When looking at investing for income it is important to focus on a stable income and the ability for that income to grow.”

Are you invested? Funds which have the largest exposure to Vodafone

Fund

%

Legal & General Ethical R Inc

9.68

Scottish Widows UK All Share Tracker I Acc

9.63

Fidelity Funds – Global Telecoms A-GBP

9.40

RWC Income Opportunities A GBP

8.35

UBS UK Equity Income A Net Acc

7.44

Waverton UK A GBP

7.38

JPM UK Managed Equity A Acc

6.64

Elite Charteris Premium Income R Inc

6.61

Standard Life Inv UK Equity High Income Ret Acc

6.61

PSigma UK Growth Inc

6.58

(Source: Lipper Hindsight)

Helal Miah, investment research analyst at stockbroker The Share Centre says: “The deal, which is said to be in the region of $100-$130bn, would enable the company to repay some debt and pay special dividends to shareholders. However, Verizon Wireless is a key contributor to Vodafone’s profits and whilst dividends could be boosted in the shorter term, investors should expect lower yields in the longer term.

“Vodafone’s business would also have a bigger European focus and challenges in the region have continued to impact figures.

“We continue to recommend Vodafone as a ‘buy’ for income seekers and believe in the short to medium term dividends will remain competitive. Vodafone is currently one of the biggest dividend payers in the FTSE 100 and has an attractive yield of around 5 per cent.”